• Looking ahead, today was supposed to be a day of détente in the US-China trade relations. Last week rumor did the rounds that the US Trade Representative Katherine Tai would cut a third of the Trump tariffs and make the announcement this afternoon. That looks like a long shot after CNBC reported that Tai is expected to announces today that China isn’t complying with President Trump’s Phase 1 trade deal. Furthermore, the increasingly bellicose situation in Taiwan isn’t helping matters either. Tai’s parents grew up in Taiwan.
  • And speaking of US politics, while a Federal government shutdown has been averted, the debt ceiling situation hasn’t been resolved. Congress remains divided. The Republicans refuse to support an increase or suspension of the debt limit in hopes of blocking the Democrats multi-trillion dollar social spending plans. And the Democrats can’t resolve the debt ceiling with a simple majority because of infighting over the size of the social spending bill and the related infrastructure bill. While we have no opinion on what US fiscal policy will shape up to be, we’re quite certain that the debt ceiling will be resolved in time before the mid-October deadline. But before that happens, the US Treasury bill curve will remain slightly inverted as non-bank market players place more and more cash at the Fed’s overnight reverse repo facility.


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